Running head: BUSINESS PLAN FOR A FINANCIAL LITERACY ...

Running head: BUSINESS PLAN FOR A FINANCIAL LITERACY PROGRAM

Business Plan for a Financial Literacy Program

Annette Mendoza

A Capstone Research Project Submitted in partial fulfillment of the requirements for the degree Master in Business Administration School of Business and Leadership

Nyack College November 2012

Capstone Project Committee: Dr. Gerard Becker, MBA Director Professor Joseph Reid, Advisor Professor Stephanie Quarles

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Table of Contents List of Appendices. ....................................................................................... 3 List of Tables .............................................................................................. 4 List of Figures ............................................................................................ 5 Executive Summary ....................................................................................... 6 Industry and Proposed Company ....................................................................... 8

Background of Financial Literacy ............................................................ 8 Significance .......................................................................................9 Education Industry ............................................................................. 10 Products and Services ...................................................................................13 Market Analysis ......................................................................................... 18 Market Size and Trends ........................................................................18 Economics of the Business .............................................................................20 Marketing Plan ........................................................................................... 41 Design and Development Plan ........................................................................ 44 Operations Plan .......................................................................................... 45 Management Team ...................................................................................... 46 Sustainability and Impact .............................................................................. 49 Overall Schedule ........................................................................................ 50 Risks, Potential Obstacles and Assumptions .........................................................53 The Financial Plan ...................................................................................... 55 Proposed Funding Requirements ..................................................................... 60 References ................................................................................................ 62

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List of Appendices Appendix A .............................................................................................. 67 Appendix B .............................................................................................. 68 Appendix C .............................................................................................. 69 Appendix D .............................................................................................. 70 Appendix E .............................................................................................. 71 Appendix F .............................................................................................. 72 Appendix G .............................................................................................. 73 Appendix H .............................................................................................. 74 Appendix I .............................................................................................. 75 Appendix J .............................................................................................. 76 Appendix K .............................................................................................. 77

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List of Tables Table I: Start-Up Costs ................................................................................... 20 Table II: 1st FY Monthly Operational Costs for After-School Program ......................... 22 Table III: 1st FY Monthly Operational Costs for Summer Program .............................. 27 Table IV: 1st FY Monthly Operational Costs without Summer Program ....................... 29 Table V: Proposed Salary for Staff ...,................................................................. 31 Table VI: 2nd FY Monthly Operational Costs for After-School Program .......................... 32 Table VII: 2nd FY Monthly Operational Costs for Summer Program ............................. 35 Table VIII: 3rd FY Monthly Operational Costs for After-School Program ..................... 36 Table IX: 3rd FY Monthly Operational Costs for Summer Program ..............................38 Table X: 4th FY Monthly Operational Costs for After-School Program ..........................39 Table XI: 4th FY Monthly Operational Costs for Summer Program ...............................40 Table XII: Operations Task Schedule .................................................................... 50 Table XIII: Pro-Forma Income Statement ............................................................. 55 Table XIV: Pro-Forma Balance Sheet ................................................................ 56 Table XV: Pro-Forma Statement of Cash Flows .................................................... 57 Table XVI: Proposed Grant Requests ................................................................. 60

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List of Figures Figure 1: Official School Register (as of 10/31/2011) ............................................. 11 Figure 2: 1st FY Break-Even Analysis for After-School Program ............................... 25 Figure 3: Proposed Expansion Plan .................................................................. 25 Figure 4: Comparison of Cost of Sales and Fixed Costs ........................................... 26 Figure 5: 1st FY Break-Even Analysis for Summer Program ..................................... 28 Figure 6: 1st FY Break-Even Analysis without Summer Program ............................... 29 Figure 7: 2nd FY Break-Even Analysis for After-School Program ............................... 33 Figure 8: 2nd FY Break-Even Analysis for Summer Program ....................................... 34 Figure 9: 3rd FY Break-Even Analysis for After-School Program ................................ 37 Figure 10: 3rd FY Break-Even Analysis for Summer Program .................................... 38 Figure 11: 4th FY Break-Even Analysis for After-School Program .............................39 Figure 12: 4th FY Break-Even Analysis for Summer Program .................................... 40

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Executive Summary Financial Restoration and Educational Excellence (F.R.E.E.) after-school financial literacy enrichment program's initial proposal is only for private High Schools in the Queens, New York community. As a Non-Profit organization, F.R.E.E.'s purpose is to establish a program that will add value to the school and benefit the student and their community. The majority of High School students lack the financial knowledge needed to make informed financial decisions that are necessary to better prepare themselves for the future. In this day and age of instant gratification, the last thing many High School students are thinking about is planning for their future. According to a study conducted in 2008 by the Jump$tart Coalition, approximately 75% of young American adults may not have the necessary financial skills to make appropriate financial decisions (Mandell, 2008). As stated by the President's Advisory Council on Financial Literacy, financial education is defined as "the process by which people improve their understanding of financial products, services and concepts, so they are empowered to make informed choices, avoid pitfalls, know where to go for help and take other actions to improve their present and long-term financial well-being." This knowledge should be acquired during the students' liberal arts education according to the Council (Kezar & Yang, 2010, p. 15). Establishing a financial literacy after-school enrichment program that will impart the necessary financial knowledge at the High School level will prepare students to make wise financial choices when planning for their future. A lack of financial literacy may produce future consequences such as misuse of credit cards, poor credit ratings, increased High School and college dropout rates, and additional stress due to a deteriorating financial situation. The negative impact of these consequences proves the need for the creation of

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F.R.E.E. to set up financial literacy after-school enrichment programs for High School students.

F.R.E.E.'s program can help meet the private High Schools' principal objective of providing high quality education. A partnership between the High School and F.R.E.E. will enhance the education received by the students. This program is not intended to solve financial illiteracy for all young people, but it is intended as an important step toward promoting Financial Literacy for a large percentage of High School students in the Queens area. F.R.E.E. will have a positive impact on the economy as a whole by imparting essential financial knowledge to the future members of society.

Although public schools can also benefit from this program, it is currently not part of F.R.E.E.'s initial scope. The current bureaucratic barriers of the Department of Education within the public school system inhibit F.R.E.E. from establishing its program at this time.

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Industry and Proposed Company The proposed company is a 501(c) (3) Non-Profit After-School Enrichment Program targeting the education industry, specifically private High Schools located in Queens, New York. The Financial Literacy organization is called Financial Restoration and Educational Excellence (F.R.E.E.) and is committed to imparting financial management skills to High School students. The company aspires to "free" students of financial challenges by positively influencing their financial behavior and attitudes toward money. Background of Financial Literacy During the past two decades there has been a decline in personal savings and an increase in debt among the U.S. population, which has made the issue of financial literacy and the lack of financial management more apparent (Friedman, 2005). Prior to the decline in financial literacy, the public education system utilized the Ray's Practical Arithmetic lessons which consisted of teaching fifth and sixth graders the basics of simple interest, compound interest, discounting notes at a bank, foreign exchange, insurance settlements, taxation, partnership interest, and bankruptcy (Cory & Pickard, 2008). These lessons were incorporated within the Department of Education's school curriculum. According to Cory and Pickard (2008), the higher grade levels (Seventh and Eighth grades) expanded upon these topics with the introduction of profit and loss, issuance of stocks and bonds, premium and discount on bonds, and brokerage commissions. As a result of incorporating these lessons into the school's curriculum, statistical data showed an increase in financial literacy from the students who participated in the curriculum. The students were able to gain the essential life skill of financial management.

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